Wm Morrison Supermarkets Plc v Revenue and Customs Commissioners
| Jurisdiction | UK Non-devolved |
| Judgment Date | 23 May 2013 |
| Neutral Citation | [2013] UKUT 247 (TCC) |
| Date | 23 May 2013 |
| Court | Upper Tribunal (Tax and Chancery Chamber) |
[2013] UKUT 247 (TCC).
Mr Justice Vos.
Mr David Scorey, instructed by PricewaterhouseCoopers Legal LLP, appeared for the Appellant, W M Morrison Supermarkets PLC
Mr Richard Chapman, instructed by the General Counsel and Solicitor to HM Revenue and Customs, appeared for the Respondents, the Commissioners of Her Majesty's Revenue and Customs
VAT - supply of disposable barbecues - whether VAT chargeable at a reduced rate on the charcoal element of the supply - reduced rate of VAT on solid fuel pursuant to Value Added Tax Act 1994 ("VATA 1994") Value Added Tax Act 1994 schedule 7A group 1Sch. 7A, Grp. 1, item 1(a) - EC Commission v France (Case C-94/09) [2010] ECR I-4261 considered - interaction with Card Protection Plan Ltd v C & E Commrs (Case C-349/96) [1999] BVC 155 considered - significance of charcoal being a concrete and specific aspect of the supply - appeal dismissed.
The Upper Tribunal (UT) has dismissed the taxpayer company's appeal against the decision of the First-tier Tribunal that there was a compound supply, rather than a mixed-rate multiple supply [2012] TC 02052.
The company supplied disposable barbecues that consisted of a rectangular foil tray containing charcoal and lighting paper. The tray was covered by a grill. It was designed to be used only once.
The issue was whether the supply of a disposable barbecue is a mixed rate supply containing charcoal subject to the reduced rate under Value Added Tax Act 1994 schedule 7A group 1VATA 1994, Sch. 7A, Grp. 1 or whether it is a single supply subject to the standard rate of VAT.
HMRC contended that a typical customer purchases a disposable barbecue to obtain the barbecue as a whole and as a means of cooking, i.e. not to obtain a supply of charcoal and a supply of a foil tray and packaging.
The Upper Tribunal considered EC Commission v FranceECAS (Case C-94/09) [2010] ECR I-04261 (known as the French Undertakers case). It held that, if domestic legislation seeks to restrict the application of a reduced rate of VAT, then ask whether that restriction is in respect of a "concrete and specific aspect" of the supply. If so, it is does not matter that the whole supply would have been regarded as a single supply using the principles established in Card Protection Plan Ltd v C & E CommrsECAS (Case C-349/96) [1999] BVC 155(CPP). The French Undertakers test does not trump CPP. Thus, if a member state has legislated to restrict the application of a reduced rate, the French Undertakers test is used to see whether such a restriction in the legislation is permissible under EU law. If it is permissible, then the reduced rate applies as the legislation envisages (para. 68 of the decision).
The Upper Tribunal held that UK legislation does not seek to carve out the charcoal element of the supply as a "concrete and specific aspect" so as to subject it to a reduced rate. Moreover a taxpayer cannot carve out an element of what would otherwise be treated as a single supply in order to apply a reduced rate to one element of the supply (para. 70 of the decision).
The Upper Tribunal held that there was not a multiple supply, one of which was of charcoal that was reduce-rated under Value Added Tax Act 1994 schedule 7A group 1VATA 1994, Sch. 7A, Grp. 1, item 1(a). The taxpayer made a compound supply that was standard-rated.
This was a lead case, as similar appeals have been lodged by Asda and Tesco.
The many cases on whether there is a single supply or a mixed-rate multiple supply show that this is a difficult and important subject.
For commentary on multiple supplies, see the CCH Value Added Tax Reporter14-800.
[1]This is an appeal by W M Morrison Supermarkets PLC ("Morrison") from a decision of the First-tier Tribunal (Tax) (Tribunal Judge Jonathan Cannan and Ms Susan Stott) (the "FTT") released on 6th June 2012 (the "Decision"). The FTT upheld the rejection by the Commissioners for Her Majesty's Revenue and Customs ("HMRC") of Morrison's voluntary disclosure in the sum of £192,934.51 in relation to the fuel element of disposable barbecues.
[2]The disposable barbecues sold by Morrison are designed to be disposed of after a single use. They comprise a rectangular foil tray which contains charcoal and lighting paper and is covered by a metal grill.
[3]The single issue in the appeal is whether disposable barbecues of this kind should be properly regarded as mixed rate supplies containing charcoal subject to the reduced rate of VAT pursuant to Value Added Tax Act 1994 schedule 7A group 1Group 1 of Schedule 7A to the Value Added Tax Act 1994 ("VATA 1994"), or whether they are single supplies subject to VAT at the standard rate of VAT.
[4]There are two other appeals on foot on exactly the same issue, brought by two other supermarket chains, Tesco and Asda. This appeal has been designated the lead case, subject to rules 5 and 18 of the Tribunal Rules 2009.
[5]Morrison has also claimed compound interest at a commercial rate if its appeal is successful, but this part of its claim has been stayed pending resolution of that issue in other cases before the Courts.
[6]Before turning to deal with the several authorities that bear upon the issue in the appeal, and the competing arguments of the parties, I will set out some of the material chronological background.
[7]On 1st August 1980, Morrison was registered for VAT.
[8]Prior to 19th October 2006, manufacturers of disposable barbecues had advised retailers (with the knowledge of HMRC) to treat sales of them as subject to VAT at an overall mixed rate, treating the charcoal element of the package at the reduced rate of VAT and the grill at the standard rate.
[9]On 19th October 2006, HMRC issued business-briefs 17/06Business Brief 17/06 clarifying that the correct treatment of sales of disposable barbecues was as a single standard rated supply.
[10]On 5 November 2010, Morrison lodged a voluntary disclosure claiming the sum of £192,934.51 in respect of allegedly overpaid VAT for the period from October 2006 to October 2010 in respect of sales of disposable barbecues. Morrison's contention was that the charcoal element of the barbecues (which was said to be 50%) should have been treated at the reduced rate of VAT, on the basis that the sale of solid fuel, in respect of which the UK legislation provides for the application of a reduced rate of VAT, constituted a concrete and specific aspect of that category of supply.
[11]On 9th December 2010, the Commissioners rejected Morrison's claimed VAT refund on the basis that the sale of disposable barbecues was "still considered to be a single standard rated supply".
[12]On 8th February 2011, Morrison requested a review of HMRC's decision by an HMRC officer not previously involved in the matter.
[13]On 4th March 2011, Ms Tracy Watkins CTA of HMRC upheld the decision made on 9th December 2010.
[14]On 15th April 2011, Morrison lodged a notice of appeal on the following grounds:-
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(i) The disposable barbecues are mixed rate supplies containing charcoal which is subject to the reduced rate of VAT pursuant to Value Added Tax Act 1994 schedule 7A group 1Group 1 of Schedule 7A to VATA 1994.
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(ii) HMRC have erred in fact and/or law in determining that disposable barbecues are single supplies subject to VAT at the standard rate of VAT.
[15]On 11th July 2011, HMRC filed their Statement of Case in the FTT, contending that a typical customer purchasing a disposable barbecue does so to obtain the barbecue as a whole as a means of cooking.
[16]On 17th April 2012, Morrison's appeal was heard by the FTT. Its decision dismissing Morrison's appeal was released on 6th June 2012. The core of the FTT's reasoning is contained in paragraphs 43-46 as follows:-
[43]In Purple Parking Ltd v R & C CommrsECAS (Case C-117/11) [2012] BVC 268 [infra] the question of whether there could be a carve out did not arise. Hence the CJEU was concerned only with the Card Protection Plan Ltd v C & E CommrsECAS (Case C-349/96) [1999] BVC 155 [infra] analysis. In our view, CPP is concerned with defining the nature of transactions for VAT purposes. In particular whether a transaction is to be construed as a single supply or as multiple supplies. In contrast, EC Commission v France [infra] is concerned with whether Member States can identify specific aspects of what would otherwise be a single supply and treat them as falling inside or outside an exemption or reduced rate. It is not concerned with any general principle beyond identifying the circumstances in which Member States are entitled to treat a single supply as comprising different elements to which different rates can apply. In the present circumstances the UK domestic legislation does not seek to carve out the charcoal element of the supply so as to subject it to a reduced rate. Nor does it seek to carve out the barbecue grill so as to tax it at a different rate to the charcoal.
[44]In all the cases we have been referred to above the ECJ has described the principle of applying dual rates of tax in terms of Member States having the possibility of limiting the application of a reduced rate. To use Mr Scorey's [counsel for Morrison] terminology, they are concerned with domestic provisions which Member States may choose to use to carve out elements of a supply so as to give rise to a dual rate of tax. They are not concerned with identifying any obligation on Member States to carve out elements of a supply.
[45]It is not open to a taxpayer to carve out an element of what would otherwise be treated as a single supply in order to apply a reduced rate to that element of the supply. We were not referred to any authority in which such a general principle has been established.
[46]It follows that we do not accept Mr Scorey's 7th principle [infra], at least in the sense he seeks to employ it. The scope of an...
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